£10,000 invested in Persimmon shares 10 years ago would have generated income of…
Persimmon (LSE: PSN) shares have taken a hammering, falling by around a third over the past five years.
Over 12 months they’re down 7%, despite enjoying a small bump lately as markets warmed to the idea that global tariff tensions might ease.
As a UK-focused housebuilder, Persimmon isn’t directly exposed to overseas trade rows. But the knock-on effects matter. If tariffs stoke inflation, as economists warn, this might force the Bank of England to slow the pace of interest rate cuts, or even reverse them.
Higher mortgage rates make life harder for buyers, hitting demand and prices. As we saw during the cost-of-living crisis, higher inflation also drives up labour and material costs.
There’s a consolation in all of this. Persimmon has paid generous dividends over the last decade, albeit with some bumpiness along the way.
Decent passive income
If an investor had put £10,000 into Persimmon shares 10 years ago, on 18 May, they’d have picked up 541 shares at the prevailing price of around 1,848p each. That holding would now be worth a measly £7,300, based on today’s share price of 1,356p. That’s a drop of nearly 27%.
Dividends change the story though. Over the past decade, Persimmon’s paid out 1,475p in total dividends per share. Based on 541 shares, that would have delivered total income worth £7,980.
Add that to the reduced capital value, and the complete return still comes in at £15,280. That’s a tidy gain of 53%, even after a rough few years.
It’s not been a smooth ride. In March 2023, the group slashed its dividend by two-thirds as profits fell. One year on, it stuck by that payout despite a further drop in earnings. Investors had pocketed a bumper 235p in 2022, but received just 80p in both 2023 and 2024.
Under its new capital allocation policy, Persimmon’s now keeping more cash back to invest in land and keep debt low.
It wants dividends to be covered by post-tax profits, and will only return excess capital through special payouts or buybacks when the business can afford it.
Glimmers of resilience
Even in a tough market, Persimmon’s showing signs of stability. Its latest update, published on 1 May, showed private sales per site nudging up just 1% to 0.74 a week. However, forward sales jumped 12% to £2.34bn.
Housebuilders face risks, of course. Interest rates are still high, the economy’s fragile, and policy shifts could dent demand again. But Persimmon’s low prices, efficient operations and cautious approach to dividends offer some ballast.
Analysts forecast a modest 10% rise in the Persiimmon share price over the next year. Add in a projected yield of 4.56% for 2025, and the total return could hit 15% if all goes well.
Investors with a long-term outlook might consider buying Persimmon shares today. Britain urgently needs homes, and at some point housebuilder share prices may finally reflect that. The big question of course, is whether people can afford to buy them at today’s prices.
I remain hopeful that the Persimmon share price will kick on, given time. It had better do so. Today’s reduced dividend won’t work as hard in compensating for further capital losses.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
